Account-based pension fees

16 May 2016

What types of fees are commonly charged on account-based pensions? CANSTAR reveals the minimum, maximum, and average fees you can expect.

Before you roll over your superannuation into an account-based pension with the same super fund, or open an account-based pension with a different fund, check what it will cost you. The fees you pay a super fund to invest and manage your money can vary significantly between funds.

The fees we assess as part of our ratings are:

  • Administration fee: Charged for maintaining your account with the fund.
  • Super fund member fee: Charged to be a member of the super fund.
  • Indirect cost ratio: This includes an investment management fee and may also include a performance fee that is charged only if the fund outperforms a certain benchmark.

And since any super fund’s fees will eat into your balance, making your investment less productive, it’s important to find out what options currently on the market provide outstanding value for money.



Finding reasonable fees

As you can see from the table below, the difference between the highest and lowest fees can be quite drastic. These annual fees can make a huge impact on your nest egg if you’re paying more than you need to, especially if you have a higher balance.

There can be a difference in the highest and lowest annual fees of around:

  • $2,000 for a $100,000 balance
  • $7,000 for a $400,000 balance
  • $14,000 for a $750,000 balance

Thankfully, the gap is closing, and the highest fees on offer this year are lower than the fees on offer last year.

Year Fees $100,000 Balance $400,000 Balance $750,000 Balance
2015 Minimum $550 $2,000 $2,875
Average $1,156 $4,294 $7,638
Maximum $2,590 $10,360 $19,425
2016 Minimum $550 $2,000 $2,875
Average $1,140 $4,131 $7,268
Maximum $2,457 $9,095 $16,974
Source: CANSTAR, 2015 and 2016. Estimated annual fees based on products assessed for CANSTAR 2016 Star Ratings

How fees affect your balance

Sometimes when you’re looking at a table full of numbers, you can wonder what it all really means. $2,000 in fees sounds like a lot, but it really depends on how much you have in your account when you start paying fees.

Without adjusting fees over time, a $2,000 fee every year for 20 years of retirement amounts to $40,000 paid in fees. That’s not too much if you take it out of a starting balance of $750,000 … but if you’re paying $2,000 fees with a $100,000 balance, you’re giving away two fifths of your minimum pension just to have an account.

The situation is even more noticeable with the larger maximum fees that apply to higher balances. A $9,000 fee every year for 20 years of retirement amounts to $180,000 paid in fees. That’s nearly half of a $400,000 account balance, while it doesn’t seem like quite as much if you have a $750,000 balance.

It’s all about perspective – and it’s exactly why you need to find the fund that is the best fit for your situation, not just “the fund with the lowest fees” or “the fund with the most investment options”.

In 2016, CANSTAR has researched and rated 64 account based pension products from 58 different providers. There’s plenty to choose from, so there’s never been a better time to find an account based pension fund with fees that suit your budget and an account that meets your investment and retirement needs.


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